VAT Guide - Intra-Community Supplies Page 1 of 7

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Intra-Community Supplies
This section outlines the procedures to be followed when conducting trade
between different EU Member States.

1. Introduction
2. Supplies of goods to other EU Member States
3. Evidence of dispatch and transport to another Member State
4. Verification of customer VAT numbers
5. Requirement to take reasonable precautions
6. Penalties for fraudulent claims
7. Supply of new means of transport to persons in other EU
Member States
8. What is a new means of transport?
9. Triangular transactions - Triangulation
10. Certain transfers are not supplies
11. Branch to branch transfers of goods
12. Mail-order and distance selling
13. Excisable goods
14. Intra-Community goods - transport services
15. EU Trade - Information Exchange and Statistics Obligations of
Traders

1. Introduction
The terms "intra-Community supply" and "intra-Community acquisition"
relate to goods supplied by a business in one EU Member State to a business
in another EU Member State where the goods have been dispatched or
transported from the territory of one Member State to another as the result of
such supply. The terms also apply to new means of transport supplied by
any person in one Member State to any person in another Member State and
transferred to that other Member State.

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2. Supplies of goods to other EU Member States

The supply of goods by a VAT-registered trader in one Member State to a
VAT-registered trader in another Member State is referred to as an ‘intra-
Community supply’, with the exception of new means of transport, distance
selling (including mail-order), and sales of excisable goods.

The place of an intra-Community supply of goods is the place where the

transport begins. A VAT-registered trader in the State may apply the zero rate
to the supply of goods to a business customer in another Member State if:

1. the customer is registered for VAT in another Member State

2. the customer's VAT registration number (including country prefix) is
obtained and retained in the supplier's records
3. this number, together with the supplier's VAT registration number, is
quoted on the sales invoice, and
4. the goods are dispatched or transported to another Member State
All four conditions must be satisfied in order for the supply to be
regarded as an intra-Community supply qualifying for the zero
rate.

Drift Limited manufactures tools at its plant in Dublin. A customer based in

Denmark orders some tools. The customer quotes its Danish VAT number
and Drift Limited dispatches the tools. As the conditions of an intra-
Community supply are met, the supply is zero-rated.

If any of the above four conditions are not satisfied the seller
should charge Irish VAT at the appropriate rate.

If the supplier is not able to satisfy Revenue that a particular consignment of

goods has been sold and delivered to a VAT-registered person in another
Member State, the supplier becomes liable for the payment of Irish VAT on
the transaction. If the conditions for zero-rating are subsequently established
the customer is entitled to recover the VAT he has paid to the supplier, from
the supplier. The supplier can then make an adjustment in their VAT return
for the period.

3. Evidence of dispatch and transport to another

Member State
The precise commercial documentation required to confirm dispatch and
removal of the goods from the State depends on the particular circumstances
involved:-

a. Transportation arranged by supplier

In many cases a supplier arranges transportation of the goods and the normal
commercial documentation related to the supply and transportation is
available (e.g. order document, delivery docket, supplier's invoice, transport
document/bill of lading, evidence of transfer of funds from foreign banks for
payment, etc.). The supplier should retain this documentation.

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b. Transportation arranged by the customer

Where transport of the goods is arranged by the customer, or the goods are
taken away by the customer using his or her own transport, the supplier must
take all reasonable precautions to satisfy himself that the goods are, in fact,
dispatched or transported to another Member State. The normal
documentary evidence should be retained in relation to the sale itself but, in
addition, the supplier should obtain and retain documentary evidence from
the customer that the goods were received in another Member State such as
copies of warehouse receipts or delivery dockets. It would also be prudent for
the supplier to record details of the means of transport used by the customer
(e.g. vehicle registration number, flight number, ship sailing).

Suppliers are particularly advised to take special care to ensure that the four
conditions outlined in paragraph 2 above are met for sales and deliveries of
goods to other Member States. Doubt can arise where for example:

the customer is not previously known to the supplier

the customer arranges to collect and transport the goods
the customer's transport arrives at the supplier's premises without advance
notice or correspondence
payment is made in cash, or
the type or quantity of goods being purchased is not consistent with
commercial practice bearing in mind the purported destination of the
goods
Where one or more of these factors are present the supplier must proceed
with particular caution. If any doubt arises, the supplier should charge Irish
VAT. If the conditions for zero-rating are subsequently established the
customer is entitled to recover the VAT paid to the supplier, from the
supplier. The supplier can then make an adjustment in their VAT return for
the period.

4. Verification of customer VAT numbers

For zero-rating to apply there must be a supply of goods to a person
registered for VAT in another Member State. The fiscal authorities in each
Member State have put in place a computerised VAT number validation
system making it possible for traders to verify the VAT numbers of their
customers in other Member States. Use of the validation system is not
obligatory however it should be used in circumstances where a trader has
doubts about the validity of a VAT number quoted. Traders who are familiar
with their customers and who are aware of their ‘bona fides’ due to trading
with them over a period of time do not need to use the validation system but
instead should have their customers confirm their VAT registration numbers
in writing.

5. Requirement to take reasonable precautions

Any supplier who takes all reasonable steps to verify that the conditions for
zero-rating are satisfied will not be penalised if it subsequently transpires
that a problem has arisen in connection with particular consignments.

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However, the tax due at the Irish rate will be recovered from any supplier
who has failed to take all such reasonable steps.

Where there is any doubt, the supplier should charge Irish VAT. If the
conditions for zero-rating are subsequently established the customer is
entitled to recover the VAT paid to the supplier, from the supplier. The
supplier can then make an adjustment in their VAT return for the period.

6. Penalties for fraudulent claims

There are severe penalties for making fraudulent claims for zero-rating;

Seizure and forfeiture of zero-rated goods which have not been dispatched
or transported outside the State
The use of an incorrect VAT number is liable to a penalty of €4,000 plus
the amount of tax which would be chargeable
Arrest
Civil and criminal penalties ranging up to €126,970 and imprisonment for
up to five years

7. Supply of new means of transport to persons in other

EU Member States
Supplies of new means of transport such as motor vehicles, boats oraircraft,
to any person (whether registered for VAT or a private individual) in another
Member State are intra-Community supplies and the person acquiring the
new means of transport must pay VAT in the Member State of destination.
Such sales of new means of transport are excluded from the distance selling
arrangements.

For a dealer selling a new means of transport to a person registered for VAT
in another Member State, the VAT treatment is the same as that which
applies to goods generally (see paragraph 2).

In the case of the sale of a new means of transport to a private individual in

another Member State, VAT is ultimately payable in the Member State of
arrival. If however the private individual collects the new means of transport
in that State, VAT should be charged by the dealer. When the customer
satisfies the dealer that VAT has been paid in their Member State, the dealer
should refund the VAT charged to the customer and adjust the VAT liability
accordingly in the VAT return for the period. The dealer should retain all
documentary proof. Normally a copy of the receipt showing payment of VAT
in respect of the new means of transport concerned is required together with
proof of the registration of the means of transport in the other Member State.

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8. What is a new means of transport?

The following table sets out what is regarded as being a 'new
means of transport' for VAT purposes:

Means of
Transport Specification 'New'
Motor Vehicle Over 48cc or over 6 months old or less, or
7.2kw power travelled 6,000km or less
Marine Vessel Over 7.5metres in 3 months old or less, or sailed
length for 100 hours or less
Aircraft Over 1,550kg take-off 3 months old or less, or flown
weight for 40 hours or less

9. Triangular transactions - Triangulation

Triangulation in the Single Market involves two supplies of goods between
three VAT-registered traders with full deductibility in three different Member
States e.g. where a trader in one Member State orders goods from a trader in
a second Member State, to be delivered to a trader in a third Member State.
To reduce the administrative and compliance burdens both on traders and
the relevant tax authorities with regard to registration and accounting, a
simplification measure is in operation in such cases:-

Simplification measure

Basically the simplification measure involves:

the zero-rated intra-Community supply from company A to company B

the supply is listed (in the VIES return) by company A to company B
as company B has quoted its VAT number, it has made an intra-
Community acquisition and accounts for this in its VAT return
company B makes a 'VAT-free supply' to company C who accounts for this
transaction in its VAT return as a 'received' supply
In this way company C is deemed to have accounted for company B's VAT
liability in Member State 3. Obviously if company C has full deductibility it
takes a simultaneous credit for this transaction.

Transactions involving more than three companies

The simplification measure can only operate in a classic triangulation

situation as set out above. If there are more than three companies involved
(e.g. successive sales between companies in Member State 2), the strict legal
position will have to be respected and registration may be required in at least
one other Member State depending on the precise circumstances.

The following chart shows two supplies of goods between three companies in
three different Member States in which the goods are delivered directly from
company A to company C as follows:

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10. Certain transfers are not supplies

For VAT purposes, certain transfers to other Member States are not treated
as intra-Community supplies. These include goods for installation or
assembly by the supplier (in this case the customer must register for VAT in
the Member State in which the goods are installed or assembled), transfer of
goods for the purpose of having contract work carried out, and transfer with a
view to their temporary use of goods in another Member State.

11. Branch to branch transfers of goods

For VAT purposes, branch to branch (with some exceptions) and similar
transfers of goods between business persons in different Member States are
treated as intra-Community supplies.

12. Mail-order and distance selling

Distance selling in the Single Market occurs when a supplier in one Member
State sells goods to a person in another Member State who is not registered
for VAT and the supplier is responsible for the delivery of the goods. It
includes mail-order sales and phone or telesales but does not include sales of
new means of transport or excisable goods.

An Irish supplier who makes distance sales to customers in other Member

States who are not registered for VAT, is liable to Irish VAT on such sales
until the value of the sales reaches the threshold applying in that other
Member State (see VAT Thresholds). Once the value of the supplier's sales
exceeds the threshold in a calendar year in the other Member State, the
supplier will be obliged to register in that Member State and account for VAT
at the rates applicable there. If the appropriate threshold is not exceeded, the
supplier may, nevertheless, opt to account for VAT in the Member State to
which the distance sales are made.

Example

Irish company making mail-order sales to Belgium of €20,000. Taxed

where transport begins (Ireland)

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Irish company making mail-order sales to Belgium of €40,000. Taxed

where transport ends (Belgium) since the threshold in Belgium is €35,000
in a calendar year
Belgian company making mail-order sales to Ireland of €20,000. Taxed
where transport begins (Belgium)
Belgian company making mail-order sales to Ireland of €40,000. Taxed
where transport ends (Ireland). Registration required since the threshold
in Ireland is €35,000 in a calender year

13. Excisable goods

Any supplier who makes distance sales of excisable goods to another Member
State must register in that Member State because distance sales of excisable
goods will always be subject to VAT in the Member State of arrival.

14. Intra-Community goods - transport services

The general rule on place of supply for services applies to intra-Community
goods-transport services supplied from one business to another business. An
Irish VAT-registered transporter supplying intra-Community goods -
transport services to an Irish VAT-registered customer charges Irish VAT. An
Irish VAT-registered transporter supplying intra-Community goods -
transport services to a person registered for VAT in another Member State
does not charge VAT and the customer accounts for VAT on the service in
that other Member State through his or her VAT return. Goods-transport
services supplied to a person, who is not a taxable person e.g. a private
individual, are taxed where the transport begins. Similar arrangements apply
for related ancillary services such as loading, unloading or handling subject to
certain conditions.

Full details are available in VAT Information Leaflet 'Transport of Goods

and Ancillary Services within the EU'.

15. EU Trade - Information Exchange and Statistics

Obligations of Traders
VAT registered traders involved in intra-Community supplies and
acquisitions of goods have responsibilities in both the VAT Information
Exchange System (VIES) and in the INTRASTAT regime. Please see VIES
and INTRASTAT

May 2016

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